Bethlehem council tempers enthusiasm over surplus with tough, upcoming budget

In reviewing an audit showing Bethlehem's first budget surplus in three years, Bethlehem City Council on Wednesday tempered its enthusiasm with the knowledge that next year will be another tough one.

The surplus in 2011 was reached, in part, because of a more than $16 million borrowing that wiped away more than $14.2 million in deficits the city accumulated since 2008.

Mark Sivak, city budget director, said that when that figure is removed from the audit, the city budget nearly broke even, leaving about $794,000 in the bank by Dec. 31.

Meanwhile, the city's expenses next year are expected to grow by at least $3 million in increased pension payments, a burden that other municipalities also face with more employees retiring and a weak market. In addition, the debt payments will increase by $800,000, and wage increases are slotted for fire and police. Neither received raises this year, per contract.

"Going forward, things are not getting easier," said Council Vice President J. William Reynolds, finance chairman. "Things will get more difficult."

The comments came as Bethlehem reviewed its first audit in three years that shows the city finishing in the black.

The audit shows that the city's general fund took in $62.57 million in revenue last year and spent $58.58 million, thanks to some controversial decisions that included restructuring of debt, fee and tax increases, job cuts and more than $16 million borrowing.

Those fixes erased all the red ink, which accumulated to $14.2 million since 2008, and left the city with a positive fund balance of $2.9 million.

Acknowledging the 54 city positions cut two years ago and 10 last year, Councilman Michael Recchiuti said that there are only so many expenses the city can cut before it affects basic services the city is obligated to provide.

"I think we have to look for increased revenue going forward," he said.

The audit noted that it took in 17.5 percent more in taxes over last year because of an increase in collection of the earned income tax, a result of the city going to a third-party collector per state law, according to the audit draft.

The revenue from the casino host fee climbed by 16.5 percent to $9.18 million, thanks to table games being in operation for a full year at Sands Casino Resort Bethlehem. Departmental earnings grew by 21 percent, largely because of an increase to the annual recycling fee and the money made from selling recycling material.

Construction was on the rise, too. The revenue for building and occupancy permits increased by $321,085.

But, Reynolds said, more projects coming onto the tax rolls will likely not be enough to cover the growing expenses. The city has to tackle major issues such as rising pension costs.

Council President Eric Evans described Bethlehem as "doing OK" in the audit, a good performance given the lagging economy that is stressing communities across the country.

He said officials need to keep that in mind as they look at the challenges facing city finances in the upcoming year.